Investment Securities

12 Months Ended

Dec. 31, 2015

NOTE 5

Investment Securities

Investment securities principally include debt securities that the Company classifies as available-for-sale and carries at fair value on the Consolidated Balance Sheets, with unrealized gains (losses) recorded in Accumulated Other Comprehensive Loss, net of income taxes. Realized gains and losses are recognized on a trade-date basis in results of operations upon disposition of the securities using the specific identification method. Refer to Note 15 and Note 19 for a description of the Company’s methodology for determining the fair value of investment securities and gross realized gains on the sale of investment securities, respectively.

The following is a summary of investment securities as of December 31:

	2015								2014
			Gross		Gross		Estimated				Gross		Gross		Estimated
			Unrealized		Unrealized		Fair				Unrealized		Unrealized		Fair
Description of Securities (Millions)		Cost	Gains		Losses		Value			Cost	Gains		Losses		Value
State and municipal obligations	$	2,813	$	85	$	(5)	$	2,893	$	3,366	$	129	$	(2)	$	3,493
U.S. Government agency obligations		2		―		―		2		3		―		―		3
U.S. Government treasury obligations		406		4		(1)		409		346		4		―		350
Corporate debt securities		29		1		―		30		37		3		―		40
Mortgage-backed securities ^(a)		117		4		―		121		128		8		―		136
Equity securities ^(b)		1		―		―		1		―		1		―		1
Foreign government bonds and obligations		250		6		(1)		255		350		9		―		359
Other ^(c)		50		―		(2)		48		50		―		(1)		49
Total	$	3,668	$	100	$	(9)	$	3,759	$	4,280	$	154	$	(3)	$	4,431

Represents mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.
2013 amount primarily represents the Company’s investment in the Industrial and Commercial Bank of China (ICBC), the remaining amount of which was sold in the third quarter of 2014.
Other comprises investments in various mutual funds.

The following table provides information about the Company’s investment securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position, as of December 31:

	2015								2014
	Less than 12 months				12 months or more				Less than 12 months				12 months or more
			Gross					Gross			Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
Description of Securities (Millions)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
State and municipal obligations	$	100	$	(3)	$	13	$	(2)	$	―	$	―	$	72	$	(2)
U.S. Government treasury obligations		253		(1)		―		―		―		―		―		―
Foreign government bonds and obligations		99		(1)		―		―		―		―		―		―
Other		―		―		33		(2)		―		―		33		(1)
Total	$	452	$	(5)	$	46	$	(4)	$	―	$	―	$	105	$	(3)

The following table summarizes the gross unrealized losses due to temporary impairments by ratio of fair value to amortized cost, as of December 31:

	Less than 12 months					12 months or more					Total
				Gross					Gross					Gross
Ratio of Fair Value to	Number of	Estimated		Unrealized		Number of	Estimated		Unrealized		Number of	Estimated		Unrealized
Amortized Cost (Dollars in millions)	Securities	Fair Value		Losses		Securities	Fair Value		Losses		Securities	Fair Value		Losses
2015:
90%–100%	52	$	450	$	(5)	15	$	37	$	(2)	67	$	487	$	(7)
Less than 90%	―		―		―	2		9		(2)	2		9		(2)
Total as of December 31, 2015	52	$	450	$	(5)	17	$	46	$	(4)	69	$	496	$	(9)
2014:
90%–100%	―	$	―	$	―	15	$	105	$	(3)	15	$	105	$	(3)
Total as of December 31, 2014	―	$	―	$	―	15	$	105	$	(3)	15	$	105	$	(3)

The gross unrealized losses are attributed to overall wider credit spreads for state and municipal securities, wider credit spreads for specific issuers, adverse changes in market benchmark interest rates, or a combination thereof, all compared to those prevailing when the investment securities were acquired.

Overall, for the investment securities in gross unrealized loss positions, (i) the Company does not intend to sell the investment securities, (ii) it is more likely than not that the Company will not be required to sell the investment securities before recovery of the unrealized losses, and (iii) the Company expects that the contractual principal and interest will be received on the investment securities. As a result, the Company recognized no other-than-temporary impairment during the periods presented.

Weighted average yields and contractual maturities for investment securities with stated maturities as of December 31, 2015 were as follows:

				Due after 1			Due after 5
		Due within		year but			years but			Due after
(Millions)	1 year			within 5 years			within 10 years			10 years				Total
State and municipal obligations^(a)	$	23		$	61		$	277		$	2,532		$	2,893
U.S. Government agency obligations		―			―			―			2			2
U.S. Government treasury obligations		120			144			132			13			409
Corporate debt securities		6			24			―			―			30
Mortgage-backed securities^(a)		1			―			―			120			121
Foreign government bonds and obligations		190			23			―			42			255
Total Estimated Fair Value	$	340		$	252		$	409		$	2,709		$	3,710

Total Cost	$	340		$	247		$	395		$	2,635		$	3,617

Weighted average yields^(b)		2.86	%		2.78	%		5.48	%		6.58	%		5.85%

The expected payments on state and municipal obligations and mortgage-backed securities may not coincide with their contractual maturities because the issuers have the right to call or prepay certain obligations.
Average yields for investment securities have been calculated using the effective yield on the date of purchase. Yields on tax-exempt investment securities have been computed on a tax-equivalent basis using the U.S. federal statutory tax rate of 35 percent.

- Definition

The entire disclosure for investments in certain debt and equity securities.

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